According to the United States Department of Justice Merger Guidelines, vertical mergers can be problematic because they may affect competition in the marketplace. See Non-Horizontal Merger Guidelines. Indeed, according to USDOJ vertical merger enforcement policy, vertical mergers can create significant and enduring costs to an affected marketplace, particularly where the vertical merger increases a monopolist’s ability to exercise market power through barriers to entry.
Why then is the United States government suspicious of patent owners who simply invent and patent and then seek to license their innovation for others to manufacture and commercialize? Why do federal courts seem to punish those who engage in a licensing business model as if those patent owners are somehow engaging in some grand subterfuge calculated on manipulating the market?
In short, why does U.S. policy with respect to patent owners and patent licensing seem to be in direct opposition to U.S. antitrust policy relating to vertical mergers? If vertical mergers are anticompetitive and particularly bad when dealing with a monopolist then why are patent owners, who we are told over and over again are in possession of a limited monopoly, encouraged (if not demanded) to vertically integrate in order to escape characterization as a patent troll?
If you do a Google search you’ll find all kinds of references to the fact that patent trolls do not make anything. How truly ironic it is that in a country where monopolies are discouraged and the federal government takes the position that vertical integration is bad that our collective understanding has become this: patent owners who do not vertically integrate innovation with manufacturing and commercialization are evil. That is exactly backwards!
The so-called patent troll problem has been created in significant part simply by gross over definition of what qualifies one to be called a patent troll. Frankly, the term patent troll has evolved to mean nothing more than this: You are a patent owner who is suing me. Essentially, whether one is a patent troll is in the eye of the beholder. If I’m on the receiving end of a patent lawsuit then you are a patent troll, regardless of whether you are an innovator, regardless of whether you are an operating company, regardless of how you acquired the patents.
Such an over-inclusive definition of the term patent troll is, of course, absurd. Yet the term persists. What is equally absurd is vilifying patent owners who do not vertically integrate and champion those who do vertically integrate. Once upon a time that would have lead Antitrust regulators to be suspicious, particularly given those urging vertical integration, as indicative of exemplary and moralistic behavior are the largest corporations in the world.
Maybe it is time for Antitrust regulators to rethink the notion of vertical integration in the innovation market and realize that innovators who patent and license are per se engaging in pro-competitive conduct. Those multinational giant corporations that specializing in vertical integration are the ones engaging in anti-competitive conduct and should be forced to answer some serious questions.